Technology of the Week – Spotify and Coursera

The Internet strongly disrupted both the music and education industries, giving rise to new companies with innovative business models, and forcing old companies to rethink their own in order to survive their new competitive landscape. In this article we discuss and compare the business models of Spotify and Coursera with the goal of showing the effects of IT in shaping global business.

Spotify’s Business Model

In 2006, the music-streaming platform Spotify was launched in response to the changing landscape produced by information technologies. Today Spotify is one of the leading music streaming platforms and counts with over 75 million active users1.

Spotify serves two different customer segments; on one-hand music fans, and on the other advertisers2. Spotify’s value proposition to music fans is “get all the music you want, whenever you want it”2. To fulfill its promise, Spotify requires massive Data Centers and Cloud Services3. Data is another key resource for Spotify, since it uses all data collected on user listening habits to develop “taste profiles” to deliver the “right music listening experience”4.

Spotify builds relationships with key partners in order to provide its services. First, with music labels, which allow access to their catalogues; royalty payments to these partners are one of Spotify’s main cost drivers. Second, with brands such as Facebook, which serve as channels to reach their customers 2.

Spotify uses a freemium revenue model1. Users that opt for the free version are financed by brands, which in exchange are allowed to advertise to users using several ad-formats. Premium users pay 9.99 euros for unlimited music streaming.

Coursera’s Business Model

Coursera also serves two customer segments; first students and second employers and universities5. It provides value to students by providing access to top-quality education from prestigious universities, and to companies and universities by sharing the data and insights it collects from students. It builds strong customer relationships with students by providing personalized services like course recommendations, and promoting interaction within its online communities.

A key success factor for Coursera is developing relationships with key partners such as Universities, which deliver the content that attracts users to the platform. Similarly to Spotify, fees to universities and are a large cost driver for Coursera. Coursera primarily communication channel is its own platform.

Similarly to Spotify Coursera uses a freemium revenue model. Users can attend to courses for free, but if they wish to get a verified certificate they need to pay. Coursera also makes revenue by selling companies and universities the data it collects.

Comparison between both business models

The following table provides a comparison between the strengths and weaknesses of the business model of each platform.

Both platforms have several similarities when it comes to strengths; differences lay mainly in their weaknesses. Both companies are extremely good at providing valuable content for free, using data to engage users, and they have both build strong partnerships with well-established brands.

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